Contract Leverage: Survival Rules Every Beginner Must Know

Leverage trading is like a double-edged sword; when used well, it can quickly amplify profits, but when used poorly, it can instantly consume your principal.

For newcomers entering the market, the sharpness of this sword often exceeds imagination.

Leverage essentially means borrowing money to increase the scale of trading. For example, with a principal of 100 yuan and 5x leverage, you can operate a trade of 500 yuan. However, during market fluctuations, losses can erode your principal at a rate of 5 times.

Many people mistakenly believe that high leverage is a shortcut to wealth, but they actually fall into a risk trap—when the market moves against them and margin is insufficient, the system will forcibly liquidate their positions, leaving no chance for recovery.

To avoid being "killed" by leverage, it is crucial to adhere to three iron rules:

1. Don't be greedy with leverage

Beginners are advised to start with 1-3x leverage to familiarize themselves with market volatility. High leverage may seem thrilling, but it amplifies human weaknesses: when chasing gains and cutting losses, the fluctuations of 10x leverage can be enough to cause a psychological breakdown.

2. Position control is a lifeline

No single trade should risk more than 5% of your capital, and total position size should not exceed 30%. Even if you make a wrong judgment in a certain trade, you still have enough funds to respond to subsequent market conditions. Trading with a full position is equivalent to handing your fate over to the market; one mistake could wipe you out.

3. Stop-loss must be set as a "hard indicator"

You must clarify your stop-loss level before entering the market; for example, if losses reach 2% of your principal, liquidate immediately. Many people fantasize about "holding on a bit longer to break even," resulting in small losses turning into liquidation. Remember: the market will not accommodate your wishful thinking.

The core of leverage trading is "survival first." Instead of pursuing short-term gains, treat each operation as a long-term investment.

When you can maintain calm with a 5% position, 3x leverage, and set stop-losses amidst volatility, you have truly mastered this tool. After all, the longer you survive, the more you can earn.

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